Returns Management in Omnichannel
Increasing customer satisfaction and sustainably optimizing returns management - is that possible?
Professional returns management is essential for success in omnichannel retail. The dream of most retailers is a management system that prevents returns from occurring at all. But this is illusory. There will always be products that the customer doesn't like on site or that don't fit. With good returns management, however, companies can reduce the returns rate and ensure a high level of satisfaction among their own customers. However, there are a few points to bear in mind.
What Is Returns Management?
The term returns management covers a significant part of returns logistics and customer management. Returns management involves organizing not only the shipping or return of goods but also the corresponding financial transfers and the distribution of information. The focus must be on customer satisfaction as well as fast and efficient processing throughout the transportation of goods. In addition to these purely logistical processes, companies must also ensure that returns management minimizes the number of returns. Returns management, therefore, covers a very large area that is of enormous importance for omnichannel retail companies. Returns management is becoming increasingly important in e-commerce in particular, as a large number of returns can put a company at risk economically. For this reason, many companies are increasing their staffing levels in the returns area.
You will learn how an Order Management System supports the coordination of returns in omnichannel in our previous blog article.
Reasons for Returns
The return of goods by customers can be caused by many different processes. Online retail in particular suffers from a very high number of returns because customers are unable to pick up the products or try them on in a store. The clothing sector in particular is therefore one of the areas with the most returns. But other sectors also have to learn to live with returns. Among other things, this also means that a company should evaluate the reasons for returns.
The reasons can be divided into four categories. Firstly, the product itself. But financial arguments and logistics can also lead to returns. And the most important point is the customer. Let's take a closer look at these aspects:
Financial reasons for returns
- A competitor offers the product at a lower price
- The customer can no longer afford the product for personal reasons
Logistical reasons for returns
- A delivery time that is too long / poorly communicated
- Damage to the product due to delivery
The product itself as a reason for returns
- The quality of the product does not meet the requirements
- The online presentation of the product is misleading or inadequate
- Material, feel, smell or processing do not meet customer requirements
The customer as a reason for returns
- The customer exercises their right of withdrawal
- The customer uses the return to compare different goods
All of these reasons are justified and valid. Nevertheless, as part of returns management, companies should look at which adjustments can be made to reduce the number of returns.
Why You Should Prevent Returns
Returns not only cost a company money, they also tie up manpower and diminish the customer's trust in the company. Let's take a closer look at these points. First of all, the costs. These are not only due to the shipping costs of the return shipment, but also to the costs of checking the returns and processing them. After all, employees have to be hired or seconded just for this purpose, which significantly increases personnel costs if the returns rate is high. This leads directly to the second point. Many returns tie up the manpower of your own employees. In the worst case, they have to take on the returns in addition to the normal logistics. This can quickly lead to overloads and thus to further problems. Customer loyalty also suffers if the customer feels that the product does not meet their expectations or is not of the desired quality. Although good and clear returns management can counteract the last point to some extent, returns for these reasons should be avoided or at least reduced wherever possible.
The Importance of Returns Management
The importance of good returns management is enormous. It has a significant impact on the company's profits and is essential for the growth of a company. In addition, returns management is of course also a figurehead for a company and can help it to stand out from the competition - this is particularly true for the supreme discipline in retail, handling returns in omnichannel.
With returns management, a distinction is made between preventive and reactive management. Both are equally important for the company and must be considered equally in every case. Each form of returns management requires optimized IT structures and a logistics chain that can process returns quickly and sustainably.
Preventive returns management
Preventive returns management aims to reduce the number of returns through various measures in advance. Among other things, by checking your own offers. Are the product descriptions clear? Are there good, high-quality photos of the product? Are all the details easy to understand? Do all images correspond to the actual product? Improvements in this area alone can prevent many returns because customers can make a more conscious and, therefore, better purchasing decision. Reviews of the product by other customers are also important in preventative returns management. Other options, such as vouchers for orders without returns and similar measures, can also be used proactively to persuade customers to refrain from making a return.
Reactive returns management
Reactive returns management deals with the actual process of returns. Here, companies have no influence on the number of returns, but must always minimize the effort on both the customer and the company side. For example, customers are actively supported in the returns process, receive return slips quickly and easily and thus benefit from clear communication. The forwarding of data within the company also plays an important role. If the customer returns a product, they must receive either their money back or a corresponding voucher as quickly as possible. The role of reactive returns management is to ensure customer satisfaction while keeping the costs per return as low as possible.
This also applies to the processes within the retail company when returns are received. These must first be checked and documented after receipt of the goods. All data is recorded and stored in the customer account and in the complaints department. The quality of the product is checked to determine whether the product can be returned for sale. If this is the case, the product must be reconditioned and repackaged. Defective goods or faulty products must be disposed of and their packaging recycled. The reconditioned goods must now be transferred back to warehouse logistics and put on sale. Reactive returns management ensures that all these processes are optimized and generate as few costs as possible.
Goals of Returns Management
The most important goal in returns management is to reduce the company's operating costs by improving processes and reducing returns. The second goal is always to improve customer satisfaction and, thus, customer loyalty. All processes within returns management primarily serve to improve logistics and the company's own product presentation in order to prevent returns wherever possible. However, as a large part of the work also involves direct contact with customers, the Customer Relationship Management (CRM) can also be taken into account in this area.
Good returns management has the following objectives:
- Reduction in the number of returns through better product presentation
- Improve logistics to avoid long waiting times
- Optimization of processes to make it easier for customers to make returns
- streamlining of all processes from receipt of returns to resale
Designing a Smooth Omnichannel Returns Process
In order to get returned goods back on sale as quickly as possible, it is advantageous that many of the necessary processes can be digitized. This not only saves paper, but can also sustainably and efficiently accelerate the following omnichannel processes:
- Returns bills in the parcel can be avoided with online solutions
- Customers can freely choose the location of the return
- Only returnable goods are presented to the customer in the selection
- The customer can provide direct feedback on the return
- The customer is offered incentives to return the goods directly in the store
- Returns can be automatically routed to stores or warehouses
- Customers get their money faster
- All procedures in the returns process save money and time
Returns Statistics
Maintaining statistics on your own returns is particularly important for retail companies. Recording returns in the omnichannel can not only provide information about goods, channels and purchasing behavior, but also about individual products. It is very easy and quick to determine that the statistics for some products are significantly high. This makes it very easy to identify problematic products or problematic product descriptions or images using the statistics. If there are products that are permanently returned in very large numbers, it may even make sense to remove these products from the range in order to improve your own data.
Here, however, patience and sensitivity are required. Although the returns statistics are accurate and usually updated on a daily basis, there is always a delay before changes become apparent. One of the reasons for this is that there is always a proportion of customers who have already shopping cart and do not view updated descriptions again.
aroma® Unified Commerce Suite
The Unified Commerce Suite aroma® enables retailers to seamlessly digitalize and optimize the ordering and returns process with its modular function modules. Thanks to the flexible API architecture, aroma® can be easily integrated into existing systems. For example, the returns registration function module can be integrated directly into the MyAccount area of an existing eCommerce system to record returns easily.
The system automatically checks returnable items, suggests possible return locations and generates QR codes (digital return slips) for a smooth return. In addition, existing processes for recording scans - whether in the store or by the shipping service provider - can be used to track returns seamlessly. This not only enables precise shipment tracking, but also the mapping of functions such as prerefunds. In addition, aroma® can automatically determine the optimal return location to make the entire process more efficient.
Effects of AI on Returns
Artificial intelligence (AI) will have a huge impact on returns and returns management in the future. Not only can returns be significantly reduced on the basis of different calculation models, but they can also be statistically calculated using artificial intelligence. The customer data that flows into these statistical models is particularly important here. In this way, different customer groups with different frequencies of returns can be separated from many individual pieces of data. In addition, these models can be used to establish various solutions with which returns can be prevented or minimized.
Possibilities here include displaying items in the store only in the right size for the customer and in different colors. This minimizes the likelihood that a customer will buy clothes in different sizes just to try them on. If the data shows that the customer has only kept sweaters and T-shirts in size XL, for example, but has always ordered other sizes and returned them, AI could be used to only show them clothes in size XL.
The Distributed Order Management module from aroma® relies on AI-supported analyses to preventively reduce returns. The intelligent evaluation of order and returns histories makes it possible to identify patterns in purchasing behavior. In the fashion sector in particular, for example, the system provides information on size deviations in order to minimize the number of selection orders - such as the same product in several sizes - in the shopping basket. In this way, aroma® actively helps to avoid unnecessary returns and, at the same time, optimize the shopping experience.
Customers can also be discouraged from returning their orders by offering suitable coupons, free gifts, and other goodies. Instead of relying on feelings, artificial intelligence can offer customized solutions for every company.
Conclusion on Returns Management
In summary, it can be said that no modern company can do without good returns management and will be able to do so in the future. Online retail in particular clearly shows that the issue of returns is increasingly becoming a problem for many retailers.
The central element for returns management is a powerful unified commerce suite that is able to manage orders including returns and analyze them comprehensively. AI in particular will play a significant role here in the future and ensure targeted improvements in various returns rates. If these technologies are combined with a good order management system, goods can be put back on sale more quickly.
However, this can also mean that companies currently have to break up, modernize and change existing structures. In warehouse logistics in particular, many companies are not yet able to manage returns quickly and efficiently while keeping the workload for employees reasonable. Sustainable solutions and investigations using artificial intelligence can better identify and cushion workload peaks. Companies that master the transformation in this area now are ideally equipped for the future.
Digital commerce describes electronic commerce through digital channels such as online stores, marketplaces and mobile apps. This modern form of commerce enables companies to offer their products globally. With digital commerce, companies can expand their product range, address new target groups and implement innovative sales strategies to increase their success.
Arvato Systems stands for innovative solutions in the field of digital commerce. With in-depth industry knowledge in retail and the consumer goods industry, we offer customized services that cover the entire process chain. From optimal master data and article management to customized e-commerce architectures and powerful customer loyalty systems - we provide you with holistic solutions for your digital success.
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